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“A two-Sided coin: Disentangling the economic effects of the 'War on drugs' in Mexico”

Author

Listed:
  • Germá-Bel

    (Departament of Economic Policy & GiM-IREA, University of Barcelona. Av. Diagonal 696; 08034 Barcelona, Spain.)

  • Maximilian Holst

    (Departament of Economic Policy & GiM-IREA, University of Barcelona. Av. Diagonal 696; 08034 Barcelona, Spain.)

Abstract

Mexican President Felipe Calderón was sworn into office in December 2006. From the outset, his administration was to deploy an aggressive security policy in its fight against drug trafficking organizations (DTOs), in what became known as the Mexican ‘War on Drugs’. The policy was strongly condemned because of the 68,000 unintentional deaths directly attributable to it. Here, we evaluate the economic effects of this ‘War on Drugs’. To disentangle the economic effects of the policy, we study the effects of homicides and the rise in the homicide rate together with the impact of federal public security grants and state-level military expenditure on economic growth. Using spatial econometrics, we find that at the state-level the number of homicides reduced the Mexican states’ GDP per capita growth by 0.20 percentage points, while the growth in the homicide rate increased the states’ per capita GDP by 0.81 percentage points. The government’s efforts to fight DTOs had a positive and highly significant impact on economic growth.

Suggested Citation

  • Germá-Bel & Maximilian Holst, 2016. "“A two-Sided coin: Disentangling the economic effects of the 'War on drugs' in Mexico”," IREA Working Papers 201611, University of Barcelona, Research Institute of Applied Economics, revised Apr 2016.
    • Handle: RePEc:ira:wpaper:201611
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    References listed on IDEAS

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    More about this item

    Keywords

    Drug trafficking organizations; Militarized disputes; Security policy; Homicides; Mexico; War on Drugs. JEL classification: D74; K42; H56; R11.;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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